Law Relating to Civil Penalties

Project Overview

In 2011, the Law Commission was asked to review the use of pecuniary penalties as a regulatory tool. These are financial penalties that policymakers are increasingly opting to use in place of criminal sanctions, to punish and deter misconduct in a number of regulatory regimes. They were first used in 1986 in the Commerce Act and now appear in 18 Acts of Parliament, including the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 and the Unsolicited Electronic Messages Act 2007.

The Commission published an Issues Paper in 2012, seeking feedback on a number of questions relating to the use and design of these penalties. It received 20 submissions from a range of different stakeholders.

The Commission has published its Report in 2014 with final recommendations to the Government on the use and design of pecuniary penalties. In its Report, the Commission makes nine recommendations to Government about the need for these penalties to be carefully designed so that they do not create a risk of unfairness or injustice to defendants.

The Report was tabled in the House of Representatives on 30 October 2014. The Government responded to the Report on 4 May 2015, largely accepting the recommendations in principle but also said that more work was required to analyse the Commission’s proposed legislative guidelines.

Terms of Reference

The Government asked the Law Commission to review the law on civil penalties.*

Civil penalties have been a feature of regulatory legislation in New Zealand since the mid-1980s. In recent years they have been included in an increasing number of Acts as part of a suite of enforcement measures. During that time the Legislation Advisory Committee has raised concerns (a) about the nature of civil penalties and (b) that insufficient consideration has been given to the principles that should guide both the introduction of civil penalty provisions and the procedure for their imposition.

The Law Commission considered the law relating to civil penalties, with emphasis on:

the nature of civil penalties;

when it might be appropriate to include civil penalties in a legislative regime;

the procedural provisions that should accompany them; and

whether some form of guidance about civil penalty provisions should be in place.

*Over the course of the review, the term has been changed to "pecuniary penalties".

Issues Paper

IP33
Civil Pecuniary Penalties

Publication date

08 November 2012

Chapters 1 and 2 of the Issues Paper, Civil Pecuniary Penalties (IP33), set out the existing landscape. The Commission noted that a first principles review of civil pecuniary penalties is needed because of: (a) their comparative novelty; (b) the inconsistencies in the design of the existing regimes; (c) concerns that they illegitimately blur the traditional distinction between the civil and criminal law; and (d) experience in other jurisdictions, particularly Australia, where courts have imposed additional “quasi-criminal” protections on their imposition.

Chapter 3 of the Issues Paper focused on the nature and validity of civil pecuniary penalties. The Commission assessed where civil pecuniary penalties sit against the traditional criminal-civil divide. It concluded that they are a “hybrid” action and took the position that while such hybrids have a valuable role to play, there must be robust policy justifications for their use. Chapter 4 critiqued those policy justifications.

The third part of the Issues Paper was concerned with matters of legislative drafting and design. Chapter 5 identified three guiding principles that should underpin the design of a civil pecuniary penalty regime: fairness; the effective enforcement of regulatory regimes; and certainty. It also assessed the application of the New Zealand Bill of Rights Act 1990.

Chapter 6 dealt with the “critical” design questions of: the rules of evidence and procedure that should apply; the standard and burden of proof; the privilege against self-exposure to a non-criminal penalty; double jeopardy; and intent and defences.

Chapter 7 dealt with other issues of design including: who should be able to seek and impose penalties; how penalty maximums are set in legislation; what guidance should be given to the Court; appeal rights; and limitation periods.

The final chapter of the Issues Paper asked whether the Commission should recommend guidance – such as a new chapter for the Legislative Advisory Committee Guidelines – for policy makers contemplating the use of civil pecuniary penalties. It also asked whether there is a need for legislation concerning civil pecuniary penalties.

Call for submissions

Submissions are now closed

Available formats

Report

R133
Pecuniary Penalties: Guidance for Legislative Design

Publication date

28 October 2014

In its Report Pecuniary Penalties: Guidance for Legislative Design (R133), the Law Commission concludes that pecuniary penalties are a legitimate regulatory tool when used appropriately. However, they need to be carefully designed so that they do not create a risk of unfairness or injustice. The Commission has made nine recommendations to Government in that regard. A list of these recommendations is available here.

The Commission recommends that the Ministry of Justice be consulted on all proposals for pecuniary penalties at the policy development stage, and that the Parliamentary Counsel Office draft model provisions. The Report also sets out 21 guidance points for policymakers that cover best practice when designing pecuniary penalties. The Commission recommends that this guidance be included in the Legislation Advisory Committee’s Guidelines on Process and Content of Legislation, and that when a statute that contains pecuniary penalties comes up for review, its pecuniary penalties be evaluated against this guidance.

View submissions

Government Response

The Government Response to the Law Commission’s recommendations on the Law Relating to Civil Penalties

The Government responded to each of the Law Commission’s recommendations as follows.

R1: Accepted the recommendation that the Ministry of Justice should be consulted on all proposals for pecuniary penalties at the policy development stage.

R2: Accepted in principle the recommendation for a chapter on pecuniary penalty regimes to be incorporated into the LAC Guidelines on Process and Content of Legislation, subject to the Ministry doing further work to analyse the guidelines proposed by the Law Commission in consultation with affected departments and the Parliamentary Counsel Office.

R3: Accepted in principle the recommendation that the Parliamentary Counsel Office draft model provisions for common pecuniary penalty provisions, subject to further work being done on model provisions.

R4: Accepted in principle the recommendation that existing pecuniary penalty provisions in statutes should be reviewed against the proposed guidelines when those statutes come up for review.

R5, 6: Proposed to do further work on the recommendations to (1) amend the Evidence Act 2006 to provide for a privilege against self-exposure to a pecuniary penalty, and (2) to limit or remove that proposed privilege from existing pecuniary penalty statutes where justified. The Ministry was directed to report back to the Minister of Justice by the end of 2015.

R7: Accepted the recommendation to instigate a review of how maximum criminal and pecuniary penalties should be set in legislation, but to progress this as other priorities allow.

R8: Proposed to do further work on the recommendation to supplement Cabinet Office Circular CO (O2) 4, so as to require departmental analysis of the impact of proposed new pecuniary penalties on Crown liability. The Ministry was directed to report back to the Minister of Justice by the end of 2015.

R9: Accepted the recommendation that enforcement agencies with the power to commence pecuniary penalty proceedings should develop and publish enforcement policies, and encouraged those enforcement agencies which do not have such policies in place to do so.